1. A marriage is a joint project carried out over a long
period of time, and ...

2. Once it is started, the parties are locked into a
bilateral monopoly situation, since breaking up and starting
over will impose large costs.

3. Most obviously due to the couple's children, but also
because each partner, especially the wife in a traditional
marriage, has become a specialist in that particular
relationship.

4. One way of dealing with such situations is a long
term contract, specifying each party's obligations.

5. This is especially important if the timing of the two
party's contribution to the joint project is out of
synch,creating an opportunity for opportunistic breach.

a. Consider a traditional marriage, in which the wife
works very hard bearing and rearing children in the early
years.

b. And expects to get paid back in the later years,
when the work associated with her part of the job is much
less--and her husband's income much more.

c. Giving him an opportunity to dump her at forty and
marry a younger woman.

d. One way of describing this situation is to say
that the wife performs her part of the joing project
early and the husband late, another is that women
depreciate faster than men on the marriage market.

B. The problem with using contract to solve
such problem

1. It is hard to observe the performance of each party's
contractual obligations.

2. So if one party wants out and the other is not
willing, he or she can simply degrade his performance until
the other party is willing to let him go.

3. Medieval Islamic story about a wife threatening to
force her husband to divorce her.

C. Alternative contractual
approaches:

1. No divorce.

a. Solves the problems of opportunistic breach and
opportunistic degradation of performance--there is no
longer any point to that tactic, but ...

b. It means that where the parties have made a
mistake and breach would be efficient, they are stuck.

c. This problem may be reduced, but not eliminated,
by more careful search.

A. In the past fifty years or so, marriage
has become less common, and less stable, than in most
traditional society, and illegitimacy more common than in
virtually any known past society.

B. This pattern is not limited to the U.S.;
it holds, with some variation, for most of the developed world,
which raises the obvious puzzle of why. Some possible
explanatiosn are:

C. There is less relationship specific
capital in marriage than there used to be, because:

1. Infant mortality is much less than it was a century
or two go.

a. It used to be necessary to produce children almost
nonstop in order to be reasonably sure of having two or
three survive to adulthood.

b. Now producing two will do the job.

c. If "completed children" are less costly, the cost
of breaking up and starting over is less.

d. And women who are not producing and rearing small
children for the first thirty years of their lives have
more opportunity to develop skills useful outside of the
household.

2. Increasing division of labor means that less is
produced within the household.

a. Clothes may still be washed at home--but by
washing machines.

b. Food preservation is almost entirely outside of
the house

c. And food production as well to a substantial
degree.

3. With less specific capital, the costs of divorce are
less, so divorce becomes more common.

4. Note that this is an optimistic explanation--the
increased divorce rate represents a rational adjustment to a
more attractive world.

D. There are more job opportunities for
women outside marriage.

1. Which implies both that more women would choose never
to get married and that women unhappy with their marriages
would be more willing to get divorced.

2. But why did this change occur? There have always been
some jobs that women could do outside marriage.

3. For ideological reasons?

a. A change in views of the role of women? But why
did it happen?

b. A rise in companionate marriage--the pattern we
take for granted, where spouses are close friends as well
as partners in the family enterprise.

c. Meant that husbands were more willing to trust
their wives out of their sight, in places where they
might meet other men.

d. But why did that happen?

4. Because C above meant that there were more women
available for jobs outside the home.

a. After all, through most of history one job
description--mother/housewife--absorbed nearly half the
adult labor force.

b. When that became a part time job for most wives,
the labor market adjusted.

E. The rise of the welfare state provided
an alternative for women who had, or wanted, children.

1. That explains part of the international pattern.
Sweden, which had a highly developed welfare system early,
also had high illegitimacy rates early.

2. And part of the domestic pattern. Illegitimacy rates
are much higher in lower income populations, where welfare
is a more attractive alternative relative to marriage, since
poor people make less money than rich people but can collect
the same amount in welfare.

3. But probably does not explain the decline of marriage
and rise of divorce in higher income groups.

1. The most dangerous activity that many people engaged
in used to be childbirth. With modern medicine that is no
longer true.

2. Presumably that change substantially increased the
ratio of women to men in the childbearing ages

3. Reducing the implicit price that women could command
for their sexual and child-bearing services.

4. With the result that some women who wanted children
had to bring them up themselves.

5. Argument on the exact timing:

a. Women typically marry men a few years older than
they are.

b. When the women born in 1946 came onto the marriage
market

c. There were few men born in 1944 for them to marry,
so ...

d. Existing customs, in particular norms against sex
without marriage or a commitment to marry, broke under
the strain.

6. This explanation is pessimistic from the standpoint
of women, optimistic from the standpoint of men.

G. Improvements in contraception and
abortion broke the link between the market for sexual services
and the market for childbearing services.

1. Consider two markets

a. A market for sex

b. A market for childbearing. Suppose that ...

c. On average, men want more sex than women, but ...

d. If cost of children is evenly divided, fewer
children.

2. In a world without contraception, the markets are
linked

a. One act of sex produces one sex act worth of
conception.

b. If we look only at the sex market, a woman who has
sex risks having the whole cost of bearing children as a
result, which makes her much less willing to have sex, so
...

c. The condition of having sex is a commitment to
help support the children, if any, meaning ...

d. Either only sex within marriage, or a society
which provides shotgun marriages if the woman gets
pregnant.

3. In a world with contraception, the link is broken:

a. Women can provide sex to men who don't want
children (if accompanied by the cost of supporting them)
at low cost to the women--by using contraception.

b. So women who want children are not in a position
to demand guarantees of support from men who want sex,
only from men who want children, and ...

c. On the childbearing market, the equilibrium price
favors the man, so ...

d. Some women end up rearing their children
themselves.

4. Puzzle: This should have hit first at the high end of
the income scale, not the low, because

a. Contraceptive knowledge and availability was
greater among more educated people, and

b. Safe illegal medical abortions, or foreign
abortions, were more available to higher income people

c. But it hit first at the low income end, which is
evidence against this explanation of what was happening.

5. This puzzle applies to explanation F above as well,
since good medicine was available earlier for higher income
people too.

IX. Adoption market:

A. Currently, it is illegal for the
adoptive parents to pay the natural mother for her consent to
the adoption. It is legal to pay the lawyers who arrange the
adoption, the mother's medical costs, etc. One consequence
seems to be high transaction costs (as potential adopters bid
via lawyers), and a market that shifts between surplus and
shortage.

B. One argument against payments by
adopting parents to the natural mother in exchange for her
giving up her child to them for adoption is that the rich will
be buying and the poor selling.

1. This is surely a serious oversimplification; most
buyers will be (most Americans are) neither rich nor poor.

2. In any case, what is wrong with that? Would they ban
the markets for housecleaning and child care on the same
grounds?

3. Is it better for the (richer, on average) adoptive
parents to get the child from the (poorer, on average)
biological mother, and not pay her--which is what happens
now?

C. A more interesting argument, although
not one that convinces me: Commodification

1. How we act and observe other people acting affects
how we think. If we treat something as a commodity, we and
others will think of it as a commodity, which might have bad
consequences.

a. If babies can be openly bought and sold, perhaps
we will think of them more as possessions and less as
people.

b. If sex can be openly bought and sold (legalized
prostitution) perhaps men will think of women more as sex
objects and less as people.

c. So perhaps this is an argument for banning certain
acts, not because the acts are bad, but because they
teach a bad lesson--"commodify" things that ought not to
be thought of as commodities.

2. But this argument has an odd feature,
constitutionally speaking.

a. We have an act which is both an act and speech.

b. As an act it ought to be permissable (transaction
with prostitute or baby seller)

c. We ban it because we disapprove of it as speech

d. Which seems to violate the first amendment.

3. As one student pointed out, a similar argument would
seem to apply to laws that impose special penalties for
"hate crimes." If you punish a crime more because, in
addition to doing injury, it also conveys the message "group
X are bad people who should be hated," isn't the additional
punishment a punishment for speech? After all, you couldn't
punish someone (in the U.S.) for a speech or a book arguing
that "group X are bad people who should be hated."

X. It is often
claimed that, when I have a child, I impose net costs on
others, so that leaving people free to
decide how many children they have will result in
overpopulation.

A. But it is not clear what the sign of the
net externalities from my having another child is. Positive
externalities include:

1. My child may find the cure for cancer and

2. Will reduce the amount of the national debt your
child must bear

3. And the amount your child must pay for national
defense, or scientific research, or any other government
service whose costs is roughly independent of the
population.

B. This argument is one example of an error
common in political arguments. You calculate net externalities
considering only the externalities of one sign (negative if you
want to ban something, positive if you want to subsidize it)
and ignoring those of the other sign.

C. How in principle do we define the
optimal level of population?

1. If we measure it by per capita income, utility, or
something similar, we commit a fallacy of composition.

a. Consider one additional person, who will impose
neither net costs nor benefits on the rest of us. How can
we say that his life (utility 10) is a good thing if the
rest of us have an average utility of 9, but the same
life is a bad thing of the rest of us have an average
utility of 11?

b. Mead's example: Consider a world with two
communities, A and B. Both are attractive places filled
with happy people, but A is a little happier than B. Is
the world a better place if B is wiped out by a plague?
Average happiness goes up.

2. If we measure it by total utility, we need to define
a zero point, so as to know if an individual contributes
positive or negative utility to the total.

a. The obvious zero point is death, but ...

b. That leads to a rule very favorable to large
populations.

c. Two unhappy people are better than one happy one
unless they would be willing to flip a coin: heads they
get to be the happy one, tails they die. They will have
to be pretty unhappy to agree to that.

A. Contract enforcement? Like copyright--it
makes it easier to enforce the contract against infringement
involving partners not party to it.

B. Overenforce to protect third
parties?

1. Children--who may be injured if adultery leads to
marital breakup

2. Keep down VD, AIDS

3. Law against prostitution can be viewed as a way in
which wives enforce the marraige contract by making it
harder for husbands to break it.

4. Which suggest that such laws might decline in a world
where casual sex with women who are not prostitutes has
become more available, due to better contraception, less
marriage, etc.

Tort Law

I. What is a
tort?

A. A wrong done by A to B which may be
privately prosecuted by B, typically for monetary damages,
although injunctions are also possible

B. Differs from criminal law in being a
private rather than a state action.

C. And from contract law in not being based
on any contract between the parties.

D. Four issues arise:

1. What makes it wrongful: Competition is not a tort.
Some system of rights is assumed, and a tort involves a
violation.

2. Causation: What does it mean to say A caused the
harm?

3. Liability--strict liability, negligence, contributory
negligence, etc. Under what circumstances am I liable for
the consequences of my actions?

4. Damages--how calculated?

E. One can think of all these issues in
terms of economic efficiency, although whether doing so
describes how the law actually works is an open
question.

II.
"Wrongful"

A. Tort damages are a version of a
Pigouvian tax, so ...

1. We want to treat as wrongful only acts that impost a
net externality.

2.And are worth the trouble of dealing with through the
legal system.

3. And can be dealt with better in this fashion than by
a property rule.

a. We can use injunctions or punitive damages to
enforce a property rule, where it is the injured party
who owns the property.

b. Where the injuring party owns the property and is
using it within his rights, we solve the problem by a
transaction--the other party buys the property, or the
right.

B. Should competition be a tort?

1. When I become the 101st physician in San Jose, the
wages of the first 100 physicians fall--should they be able
to sue me?

2. No, because their loss is their patients' gain.

3. So I have imposed only a pecuniary externality--a
transfer between two other people, not a net injury to other
people.

III. Causation
complications:

A. Coincidental causation.

1. I stop my friend for a moment in the street to talk,
he then continues on and is killed by a falling safe. There
is a real case along these lines:

A tree fell on a bus.

The plaintiff demonstrated that in order for the bus to
be where it was, the driver had to have been driving above
the speed limit, and ...

Breaking the law is per se negligence, meaning that it
automatically classifies as negligent even if it isn't
really. (We'll be getting to what "negligence" means
shortly)

2. Should I be held liable? If I had not stopped him he
would not have died.

3. No. My stopping him does not affect the probability
of his dying--it might just as easily have resulted in his
not being under the safe. More precisely, it does not affect
the probability calculated on the basis of my knowledge.

4. A different way of putting this is that if I do not
get rewarded when I produce the positive externality (my
stopping him happened to save him) I should not get punished
when I produce the negative one.

B. Dual causation: The victim is
accidentally shot by two hunters; each bullet would have been
sufficient to cause death by itself. Should they be
liable?

1. This puzzle is based on a somewhat less dramatic real
case: Summer v Tice.

2. The benefit of my taking a precaution that reduces
the chance I will shoot him is not the reduction in
probability of shooting him but the reduction in probability
of killing him (times the value of his life). Shooting a
corpse does no damage.

3. When I change my probability of shooting him, I
should benefit only by the resulting change in probability
that he will die, so ...

4. I should not be liable in the two bullet case case!

5. This ignores possible problems of proof, etc. It also
ignores the possibility of agreements in advance between two
hunters; I am assuming both were independently responsible
for the accident.

6. Finally, it assumes that we can costlessly impose a
fine on a hunter that fully represents the damage
done--which is unrealistic inthis case. If we can't,
punishing the two bullet case may be an indirect way of
raising the punishment for the action (careless shooting)
that leads to the one bullet case.

C. Probabilistic injury.

1. Suppose a radiation leak increases the number of
cancer cases in the surrounding area over the next 20 years
from 100 to 110. Is the reactor liable, for what, to whom?

a. If we must show that it is more likely the death
is due to the radiation leakage than that it is not, the
defendant always wins and the reactor pays nothing for
the damage.

b. If we accept a much lower standard of proof, the
plaintiff always wins and the reactor pays much too
much--the cost of all the cancers, most of which it did
not cause.

2. One solution: Make the reactor liable for the
increased risk to everyone, using a class action.

a. But diffuse costs are hard to litigate--class
actions are driven by the interest of the lawyers, not
the victims.

b. And immediately after the risk has been imposed,
evidence on how large it is will not be very good--nobody
has actually died, so we cannot start looking for
evidence of increased cancer rates.

3. What about giving each one who dies 1/11th damages?

a. When they start dying, we have at least some data.

b. Fewer cases to try.

4. What about making tort claims marketable? One firm
buys up all 110 claims, and sues on the grounds that some
ten of its claims are the result of the reactor's
ngegligence--even though it doesn't know which ten? Not an
option in our current legal system.

5. Real world equivalent--DES cases.

a. DES was a fertility drug which turned out to have
serious side effects.

b. By the time the effects were discovered, it was no
longer possible to determine which pharmaceutical company
had manufactured the DES that a particular patient had
used.

c. So if a victim sued a company, the company could
(correctly) claim that it had probably not been
responsible for that woman's injury.

d. Solution--divide the liability among the companies
in proportion to what fraction of DES each had produced.

II. What legal rule
will get the efficient number of accidents?

A. What does that mean?

1. Why isn't it zero? Because there is a cost to
avoiding accidents.

2. So we want the level of precautions by all concerned
that minimizes the summed cost of accidents and precautions.

3. For two parties, Expected Total Cost=Accident cost x
probability(Precautions by A, Precautions by B)+Cost of
Precautions by A + Cost of precautions by B.

4. So the efficiency conditions areor ...

5. Precautions to the point where an extra dollar spent
on precautions saves a dollar in accident costs.

7. Note that precautions include any modification in
behavior that affects the probability of an
accident--including not driving.

B. Another way of putting this is that the
efficient number of accidents means the accidents we would get
if everyone took all and only cost-justified precautions. Or,
if everyone took the precautions a rational individual would
take if he were going to bear the cost of his actions
himself.

C. Strict liability gives you the right
answer with unicausal accidents.

1. This a straightforward version of a Pigouvian tax.

2. In a situation where only one party affects the
external cost.

D. The problem arises where precautions by
both parties affect the probability (or size) of the
loss--Coase's critique of Pigou.

1. Even a drunk driver is unlikely to run into my car if
it is in my garage--so my decision of how much to drive
should take into account the cost I impose, on myself and
drunk drivers, by being there to be hit.

2. And even if the other driver was doing something
wrong, I might be able to avoid the accident by doing enough
things right--defensive driving.

3. And I affect the damage done, even if the accident
was not my fault, by what kind of car I drive, whether I
wear a seatbelt, etc.

4. In all such cases, what does "not my fault" mean?
Less than it seems to.

5. And the strict liability rule, while it gives the
right incentive to one driver, removes all incentive from
the other.

6. Imagine, for example, so as to avoid worrying about
both vehicles being damaged, that some people drive cars and
some drive tanks, and the tanks are strictly liable in any
collision.

7. Drivers of cars have no incentive to take care--or
stay home.

E. Negligence as a solution?

1. Negligence is defined (by economists, but not
necessarily by legal scholars) by the Hand formula (named
after Judge Learned Hand, who applied it in a famous
case--T.J. Hooper)

a. Hand says that you are negligent if you failed to
take a precaution whose cost was less than the expected
benefit in accident reduction, in other words ...

b. If you failed to take all cost justified
precautions.

2. The rule "you are liable if negligent" gives the
right answer for unicausal accidents if everything is
observed by the court, since:

a. Either you take all cost justified precautions and
are not liable, or ...

b. You don't take all cost justified precautions and
are liable, and since you are liable you bear the full
cost of the accident, and since you bear the full cost of
the accident it is in your interest to take all cost
justified precautions.

c. So you always take all cost justified precautions,
which is the outcome we want,

d. And it even works for bicausal accidents, since it
pays the tank driver not to be negligent, and since he
won't be negligent he won't be liable, and the auto
driver, knowing that, knows he will have to pay to fix
his car himself, and so has an incentive to take all cost
justified precautions, but ...

2. What if the efficiency of some classes of precautions
is observable by the actor but not the court?

a. The usual example is "activity level." The court
may be able to observe how many trips you take, but not
how much it is worth to you to take them.

b. Another example would be how much attention I pay
to my driving.

c. Under a negligence rule, you take the optimal
level of the observable precautions, you will therefore
not be found negligent, you therefore ignore costs to
other parties in choosing the level of the unobservable
precautions.

3. Negligence could lead to either more or less
litigation cost than strict liability.

a. More because there is one more question to be
settled (negligence)

b. More because there are more accidents, due to the
problem of activity level and unobservable precautions

c. Less because accidents where the party responsible
was obviously not negligent do not result in
lawsuits--the plaintiff has no claim.

VI. Liability
alternatives

A. No liability--the tank pays nothing, the
car owner pays for his own repairs.

B. Strict liability--the tank pays for
fixing the car it ran over, whether or not its driver was
negligent.

C. Negligence liability--the tank pays if
its driver was negligent (i.e. Did not take all cost justified
precautions), but not otherwise.

E. Note that A and B are really the same
rule, with tank and car exchanged.

F. As are C and D.

G. The auto/tank model makes sense where
there is a clear assymmetry between the parties, such that
either only one is seen as "causing" the accident or only one
suffers substantial losses.

H. If we generalize to auto/auto accidents,
we get:

1. No liability--each party pays his own costs.

2. Strict liability makes very little sense--I pay your
costs and you pay mine. That is because we don't have a
clear meaning for who caused the accident.

3. Negligence. Whichever party was negligent pays his
costs and the other party's. If nobody was negligent, each
party pays his own costs. If both parties were negligent?
Each pays the other's costs???

4. Strict with contributory. Like 3 above, but if both
were negligent nobody pays???

VII. Summary of
implications:

A. Assume one dimension (care) is
observable by the court, another (activity level) is
unobservable.

A. In general, because our assumption that
both courts and individuals have perfect information is not
true.

1. The court might be wrong about either what
precautions the tortfeasor took or what precautions he
should have taken, and so find him negligent when he was
not.

2. The tortfeasor might be wrong about what precautions
he should have taken, and so really be negligent. Or ...

3. The tortfeasor might gamble on the court thinking he
wasn't negligent when he really was--and lose.

B. The "reasonable man" standard.

1. One form that imperfect information by the courts
takes is the rule that negligence is judged according to
what precautions would be cost effective for an imaginary
"reasonable man" rather than for the actual tortfeasor,
since the court doesn't know whether the tortfeasor has
better or worse reactions, higher or lower alcohol
tolerance, etc. than the average.

2. Suppose you have much better reflexes than the
average:

a. One half of the argument for keeping down to what
the court considers a safe speed is that if you don't,
you will be liable for damages if you run into someone.
That argument still applies to you.

b. The other half is that if you are liable, it is
then in your interest to take all cost-justified
precautions. But keeping down to what the court considers
a safe speed is not cost-justified for you.

c. So you either keep down to the court's speed, in
order to make sure that if there is an accident you won't
have to pay for it, or

d. Drive at the efficient speed, which is faster than
the court thinks, knowing that you will be liable if
there is an accident.

3. Prediction: Courts should (if Posner is right about
the efficiency of the law) tend to use strict liability
where actors vary a lot, such that the "reasonable man"
standard works badly for many of them.

4. More generally, strict liability not just where
activity level is important (Posner's argument), but more
generally where unobserved variables are important.

C. Effects of court error depend on the
form of the error:

1. Suppose the court correctly measures your precautions
but sometimes overestimates or underestimates the efficient
level of precautions. The higher the level of precautions
you take, the greater your chance of not being found
negligent, hence liable. This tends to push you to a greater
than optimal level of precautions.

2. Suppose the court simply makes mistakes at random--a
third of the time it decides that the tortfeasor was not
negligent, whether or not he actually was. The result is
like a strict liability rule, with a punishment equal (on
average) to 2/3 of the damage done. So tortfeasors are
underdeterred, and take less than the efficient level of
precaution.

3. So it is hard to work out a theory that takes account
of court error--the effect depends on the details of what
sort of mistakes the court makes.

X. Amount of damages
That Should be Awarded: Consider the
one sided (i.e. Pigouvian) tort for convenience here.

A. If every tortfeasor is sued and
convicted, then damage payment equal to damage done gives the
Pigouvian rule--the externality is internalized. This is the
standard rule of tort damages: The tortfeasor must make good
the victim's loss.

B. But that doesn't happen because:

1. The probability of being sued and losing is less than
one.

2. Traditionally, damages were narrowly defined, so on
average less than damage done:

a. No damages for pain and suffering

b. Damages include only the value of the victim's
life to other people, not (if he dies) the value to
himself, since that is an injury to him and his claim
dies with him.

c. Both of these have been changing in recent
decades.

3. And you are not making the victim good for the costs
of suing you.

a. Under the "American rule" each party pays his own
legal expenses, as opposed to

b. The "English rule" under which the loser pays the
reasonable legal expenses of the winner

c. Which applies only occasionally in U.S. law.

C. And it shouldn't happen, because the
Pigouvian rule is wrong if imposing the punishment is
costly!

1. The higher the damage award, the more is at stake in
the litigation, hence the more both parties will spend
litigating.

a. In the 19th century, the N.H. Supreme Court, and
others, argued that "punitive damages" were ...

b. A misunderstanding of damages for non-pecuniary
injuries.

2. They are supposed to be awarded for a "deliberate or
reckless" tort, and the amount is up to the court.

3. Old examples:

a. King's messenger case:

i. The King's messengers forced their way into
someone's house, held him prisoner while they searched
his papers in an (illegal) attempt to find out if he
was the author of articles in a newspaper they
considered subversive.

ii. He sued, they argued that they only owed him
for actual damages, which were small.

iii. He got punitive damages.

b. Insult case.

i. One landowner swore he would shoot birds on his
neighbor's property without permission

ii. And did

iii. And the neighbor was awarded punitive
damages.

B. Non-economic explanations:

1. Punitive damages are really just compensation for
hard to measure injuries--reputation, etc. Shooting on your
enemy's land without his permission shames him, makes him
unhappy, lowers his reputation, ... .

2. To express condemnation

C. Other people's economic
explanations.

1. Punitive damages are a probability multiplier.
If so, why not base punitive damages on how large a fraction
of those who commit a particular tort get away with it,
rather than on whether the tort was "deliberate or
reckless?" A reckless tort should be very likely to result
in a successful suit.

2. Punitive damages are a way of playing safe if
damage is hard to measure but efficient torts are unlikely.

a. A deliberate tort requires a positive cost to
commit. So the optimal level is likely to be zero. But it
doesn't have to be--there might be a large benefit.

b. An accidental tort requires a cost to avoid, so
the optimal level is likely to be >0.

c. A deliberate tort, unlike an accidental one, can
usually be replaced by a market transaction--the
tortfeasor knows who he is going to injure and should be
able to buy permission if the tortfeasor's gain is more
than the victim's loss.

d. Or in other words, punitive damages are a way of
enforcing a property rule within the legal framework
normally used to enforce liability rules.

e. But what about a tort that is both deliberate and
efficient--polluting, when you know it is tortious,
because you are willing to pay the damage and there are
too many victims to make a voluntary transaction
possible. Or throwing sparks in the cases where doing
so--and paying damages--was efficient.

IX. My Explanation
1: Punitive damages are for very deterrable torts.

A. Economic theory of optimal damages with
litigation etc. costs

1. Without such costs, expected punishment (<P>)
should = damage done. In civil law, <P> is the damage
award times the probability that the victim will sue and
win.

2. Deterring the marginal tort at that point does no
good, so ...

3. If detering it is costly, don't do it.

4. Cost depends on elasticity, because increased award
decreases number of cases but increases cost per case.

5. If supply is very inelastic, there is a positive cost
to deter. So you only want to deter very inefficient
offenses, so you set <P> < damage done

6. If supply is very elastic, you want to deter even
offenses that are (slightly) efficient, in order to avoid
the cost of prosecuting them, so you set <P> >
damage done

7. So the optimal expected punishment is below or above
the damage done according to how elastic the supply of
offenses is.

8. This is worked out in more detail in my punitive
damages piece and my "Payne v Tennessee" piece.

B. A deliberate tort is very deterrable, so
the supply of offenses is elastic, so you should
overpunish

C. An accident may not be very deterrable,
so the supply of offenses is inelastic, so you should
underpunish.

D. The case where it is efficient to
overpunish a lot, deterring almost all offenses and leaving
almost none to be punished, brings us to a property rather than
a liability rule.

X. My explanation 2: Punitive
damages are for strategic torts.

A. Why did I beat him up, even though I
knew I would have to pay damages?

B. To deter other guys from going out with
"my" girl.

C. This only works if ordinary damages
undercompensate, since otherwise he doesn't mind being beaten
up--and paid damages.

1. But they do undercompensate.

2. Since they have no probability multiplier and ignore
pain and suffering (until recently)

3. And they should undercompensate, since ordinary
damages are for offenses with an inelastic supply curve (or
so I have just argued above).

4. This is the same argument used earlier as an
explanation of one reason why damages should go to the
victim. Remember the strategic pollution by the factory
case, back when we were talking about the difference between
damage payments and fines? Factory pollutes, pays fine,
resorts shut down, no more damage, so no more fine.

D. So we want extra damages in such cases,
to deter strategic torts.

E. This makes sense where the tortfeasor is
a repeat player.

1. The insult cases--maybe the two landowners were
really fighting over local political control and the like.
Perhaps one of them was trying to shame the other so as to
prove to other locals that they had better support his
candidate for parliament--or else.

2. The first punitive damages case I know of--king's
messenger, North British Enquirer. The crown wanted to
discourage people from writing for subversive newspapers.

3. But it does not work against our equivalent of the
king's messengers--law enforcement agents.

a. Governments are protected from tort liability by
the principle of Sovereign Immunity

b. The federal torts act waives sovereign immunity in
some cases, but not to the extent of permitting punitive
damages.

XI. Why pay tort
damages to the victim instead of as
fines to the state?

A. So he will sue. Private enforcement
system

1. But he could threaten to sue in order to be paid by
the offender to drop charges.

2. This may be what actually happened in 18th century
(and earlier) English criminal law, where prosecution was
private but punishment was by the state.

3. But it works better if the victim owns the
case--smaller bargaining range.

4. We could give the right to sue and collect to
anyone--but the victim is the one most likely to know that
the tort has happened, and he has the additional incentive
of deterrence.

B. To affect the incentives of the
victim?

1. That is a good reason in the strategic case with one
tortfeasor who, if damages go to the state instead of the
victims, can get the many victims to take precautions if he
refuses to. This is one way of controlling strategic torts.

2. But just the opposite is true in the non-strategic
case (auto accidents). Paying the damages to the victims
reduces their incentive to take precautions to below the
optimal level.

3. Note the difference between an anonymous victim tort
(auto accident, many small players) and a known victim tort
(deliberate trespass, conversion). where the tortfeasor
knows exactly who the potential victim is, and can bargain
with him.

a. Known victim tort introduces strategic problems,
but also ...

b. Possibility of Coase Theorem bargaining

c. Moving us towards a property rule instead of a
tort rule.

XIII. The problem of
measuring and compensating damages for loss of earning capacity,
death, injury.

A. Lump sum vs periodic payments

1. A lump sum reduces disincentive effect, but

2. By the same token lowers the cost of fraud. Once the
money is paid you get a ticket to Lourdes and come back
without your crutches.

B. Triple effect of injury

1. On income (readily dealt with)

2. On utility (compensate with cash)

3. On Marginal Utility of Income. This makes
compensating for the loss of utility difficult, expensive,
inefficient, perhaps impossible.

4. And explains why the price of a life seems infinite
if you try to buy one. It is not that the value of life is
infinite but that the value of money to a corpse is zero.

C. Full compensation vs optimal insurance
vs optimal deterrence.

1. Suppose it takes $100 million to make up to you for
loss of your sight.

2. You would not insure yourself for that amount.

3. You would not take the precautions, in a case where
your actions may risk your sight, that are implied by that
price.

4. So full compensation over insures and over deters.

5. But what if you would not insure at all (death for
someone with no dependants)? Does it follow that the optimal
deterrence price is zero? Obviously not.

6. So these are three different values.

D. Correct solution in principle:

1. Set damages at a level that makes people as well off
ex ante with the risk as without, as judged by risk premia
for jobs and similar criteria.

2. Allow the sale of inchoate tort claims. Now if my
tort claim leaves me "overinsured" I can sell part of it in
advance (before the accident happens), so as to consume some
of the money now when I am not dead/blind/whatever.

E. My article which discusses this at much greater length is on
the web.

Criminal Law

I. Differs from tort
law in that:

A. Prosecution is by the state

B. State controls settlement, collects
fines, imposes punishments.

C. No presumption that actual punishment =
damage done.

D. Most punishments are not fines.

E. Moral Stigma: Clinton.

F. Note that the Tort/Crime distinction may
be less clear than we usually think.

2. Criminal charges are often dependant on the victim
complaining, and ...

3. In some cases de facto out of court settlement is
possible.

a. Michael Jackson was facing both criminal and civil
charges for child abuse.

b. He settled the civil case--and the criminal case
disappeared.

c. Presumably because the witnesses decided not to
testify.

4. There have been other societies where criminal law
was privately prosecuted, or even ...

5. Where all offenses were treated roughly as we treat
civil offenses.

II. Why Have
Criminal Law: First Try

A. Simple story: Enforcing property
rules.

1. Optimal level of some offenses is close to zero

2. Most obviously because there is a market substitute,
so if the result that would be produced by the offense (your
using my land) is efficient it will happen that way even if
the offense is prevented.

a. Theft is the obvious example.

b. Assault not so clear.

c. Would we accept consensual market murder? A rich
man offers ten adventurers $100,000 each, in exchange for
their agreement that he may select one of them at random
and try to kill him.

3. So we set very high punishment, >> damage done,
to deter everything. But ...

B. That doesn't describe the real system,
since:

1. Expected penalty for murder is <damage done.

2. Lots of crimes happen--level is not zero. Do we think
they are efficient crimes?

3. So what determines the optimal punishment?

4. If it were =damage done we again have a problem--that
implies that the reason we don't raise the punishment for
murder is concern that there would be too few murders, which
seems implausible.

III. The theory of
optimal punishment part I: Price+Prodn
fn->TC.

A. Think of any probability/punishment pair
in terms of its certainty equivalent.

B. And its cost:

1. Punishment cost=cost to the punishee-benefit (or
+cost) to the punishor

2. Enforcement Cost: Cost of catching and trying
offenders.

C. For a given certainty equivalent, find
the p/P pair that minimizes total cost, thus produces a given
level of deterrence as cheaply as possible.

D. Repeat for every certainty equivalent
and you have a total cost curve for deterrence, since

E. The ex ante cost the legal system
imposes on the criminal for committing the crime is the
certainty equivalent.

F. Which I call the "Effective
Punishment"

1. It would be the "expected punishment" for risk
neutral criminals and money punishments.

2. This generalizes it to all risk tastes, all forms of
punishment.

3. And includes the costs of risk aversion or the
benefits of risk preference in the punishment cost

4. As seen by considering a costlessly collected fine
imposed on a risk averse defendant--with net social cost,
due to his participating in a lottery he disvalues.

G. Note that this is just like deriving a
total cost curve from prices and production functions in
ordinary price theory. TC(E) where E is effective
punishment.

IV. Part II: TC
->optimal punishment:

A. Each offense does damage D.

B. We deter it by imposing an effective
punishment E via the least cost combination of p,P.

C. There is some supply curve for offenses
O(E)

D. From O(E) and TC(E) we could calculate
the marginal cost of deterrence.

3. Which is an argument for either higher fines for the
rich (price discrimination) or not trying to deter the rich
because it costs too much.

4. What about punishment costs?

a. Rich can pay larger fines, which lowers punishment
cost, but ...

b. Can higher better lawyers, which may raise
conviction costs.

VI.
Complications.

A. Differing probabilities of
apprehension.

1. Imply that the reason one person commits a crime and
another does not might be a difference, not in the value of
the crime to the criminal, but in his chance of getting
caught.

2. To some extent, the legal system can try to allow for
differing probabilties at sentencing--higher punishments for
experienced thieves, who presumably are better at getting
away with crimes, for example.

B. Incapacitation

1. We have discussed punishment entirely in terms of
deterrence.

2. Another reason to lock someone up, or hang him, might
be to prevent further crimes.

3. We could include this in our analysis by counting
incapacitation as a negative term in punishment cost--a
benefit to help balance the costs.

VII. Taking Account
of Marginal Deterrence.

A. If armed robbery gets the maximum
possible punishment, then the additional punishment to an armed
robber for killing the victim is zero.

B. More generally, in setting optimal
punishments we must allow for the possibility that we may deter
someone out of one crime and into another.

C. Which makes the calculation of an
optimal set of punishments more complicated.

1. That would be the right answer if we could costlessly
avoid convicting innocents.

2. But the only way to be sure of doing that would be to
convict nobody.

3. By increasing the standard of proof, we can reduce
the number of innocents we convict--at the cost of
increasing the number of guilty defendants we acquit.

4. How, in principle, do we find the right balance
between the two?

B. What is the cost of convicting an
innocent defendant?

1. The cost of catching and trying him is paid whether
or not you convict him.

2. Convicting an innocent provides no benefit in
deterrence--assuming that the criminals are well informed
about your standard of proof and thus discount the number of
people you convict to take account of the fraction who are
innocent.

3. So the net loss from convicting an innocent defendant
is the punishment cost.

4. Including, of course, cost to the defendant.

5. Note that the net cost of stigma is large for an
innocent defendant, since the stigma conveys false
information, but low and possibly negative for a guilty
defendant.

C. What is the cost of acquitting a guilty
defendant?

1. If you wnat to maintain the same deterrence, you have
to catch and convict another guilty defendant

2. So it is the cost of catching and convicting one
guilty defendant

3. No extra punishment cost, since you are still
punishing the same number

4. But remember that in order to convict one guilty
defendant you must, on average, convict some fraction of an
innocent defendant, so the costs associated with that must
be included.

D. In an efficient system, you keep raising
the standard of proof until, for an additional increase, the
gain from convicting fewer innocents is just balanced by the
cost from acquiting morel guilty.

E. If the ratio of the cost in B above to
the cost in C above is R, you want to raise the standard of
proof until a small increase will result in aquitting one more
innocent defendant and R more guilty ones.

IX. The Paradox of Efficient
Punishment:

A. Why not hang them all?

1. Argument for efficient punishments.

a. If we shift to a lower cost punishment probability
combination giving the same deterrence ...

b. The expected cost to the criminals is the same

c. The crime rate, hence the cost to the victims is
the same

d. And the enforcement system saves money.

2. What would such an efficient system look like?

a. Fine if collectable.

b. Make it collectable by threat of worse punishment
if they can't pay.

c. Temporary slave labor if they cannot pay a fine.

d. Execution if they cannot produce more as slave
labor than they cost to feed and guard.

e. And after you execute them, use their organs for
transplants.

3. English 18th century example.

a. No imprisonment for serious crime.

b. Hang, transport, or pardon.

c. No imprisonment for serious crime.

d. Costs of slave labor too high to make imprisonment
an efficient crime... It looks as though galley slaves
(easy to guard and monitor) more than paid their costs,
other forms of slavery for violent criminals did not. The
English didn't use galleys, because the Atlantic is too
rough for them. So their only cheap imprisonment option
was transportation. For more details, see my
article
on 18th c. English law.

4. If the sort of efficient system of punishments I have
described is a bad idea, as most people believe, why?

1. If a hunter is lost and starving and comes to a
locked, empty cabin containing food and a telephone, it is
efficient for him to break in.

2. Because the benefit to him is greater than the loss
to the owner.

3. Which seems right--but only if we are allowed to
count the benefit to him.

B. Even if you want to deter it, how much
do you want to deter it?

1. Deterrence is costly.

2. Its benefit is the net gain from deterring an
offense.

3. Which is greater the greater the damage done to the
victim, but also ...

4. Greater the less the gain to the offender.

5. We are willing to pay more to deter an act of arson
committed for the fun of watching buildings burn than to
prevent a hungry man from stealing food--and would be even
if the total damage done to the victims was the same (the
hungry man steals lots of food over a period of years, say).

C. How do we know what is bad before we
know what is inefficient?

1. Part of the attraction of the economic analysis of
law is that we can start with one very simple "moral"
assumption--the desirability of economic efficiency--

2. And deduce from that that robbery and murder ought to
be illegal, contracts ought to be enforced, ...

3. If we start out already knowing that robbery is bad,
hence gains to robbers don't count, we are rigging the
game--guaranteeing that we will get out as efficiency what
we put in as ethics.

XI. Why have
criminal law anyway?

A. We have two legal systems: If someone
breaks your arm you call a cop, if he breaks a contract you
call a lawyer. Why?

1. Is there any reason why we could not treat all
current torts as crimes, or ...

2. All current crimes as torts?

3. I'll be talking mostly about the latter option.

B. Some related questions are:

1. Why bundle rules the way we do? In other words, why
to criminal and civil law differ in the particular ways they
so?

2. Why sort acts the way we do? In other words, why are
particular things crimes and other things torts?

3. In both cases, of course, the answer might be "there
is no good reason."

C. Note that an answer must take account of
ways in which the law would change if we changed these things.
For example, a tort system that included offenses with low
probability of apprehension might introduce probability
multipliers on a more regular basis.

XII. Should we
abolish the criminal law?

A. Why have criminal law at all?

1. It is hard to get people to prosecute if the
defendant is judgement proof, and ...

2. If you put in probability multipliers, offenders who
commit crimes that are hard to prove are particularly likely
to be judgement proof, since the damages they will owe if
convicted will be very large.

B. Other possible reasons.

1. Diffuse injury. But that does not apply to most of
criminal law, and does apply to some of tort law--dealt with
by class actions, could be dealt with by transferrable tort
claims.

2. To express moral outrage?

3. Because victims can't afford to sue? Make claims
tranferable.

4. To get the optimal probability/punishment bundle.

a. The theoretical solution--for each level of
deterrence (i.e. of effective punishment), find the
combination of probability and punishment that gives that
amount of deterrence at the lowest (punishment cost +
apprehension cost) cost. The result is the total cost
function for deterrence--just like deriving an ordinary
TC function from a production function and input prices.

b. In a private system, the fine is both the
punishment and the payment to the enforcer, so you can't
separately set punishment and probability, so ...

c. You get the Landes/Posner argument on the
inefficiency of private enforcement. There is no reason
to expect that the optimal fine will result in the
optimal probability of being caught.

d. And my solution to it: Let the court set the
effective punishment not the actual punishment. The
enforcement firm buys a bunch of offenses from the
victims, pays to catch them, imposes the punishment that
combined with the fraction it catches yields the right
effective punishment. Punishment paid by the offenders is
being fixed, the firm gets punishment collected (fines
minus cost of jails etc.), pays for apprehension, so
apprehension+punishment cost is a subtraction from its
profit, so it minimizes the sum, giving us the efficient
probability/punishment combination.

e. Which runs into a problem if the market price of
an offense is negative, and ...

f. Victims are anonymous.

5. But note that we have no theoretical reason to expect
optimal litigation expenditure in ordinary tort law, which
is the analogous problem. So this is an argument for public
enforcement but does not explain why we have private
enforcement for the sorts of things that are now torts.

6. And inefficiency is relative to ideal, not to real
alternative. There is no good reason to believe that the
internal incentives in a government run system will generate
the optimal combination either.

J. Why do we have a higher standard of
proof for criminal law?

1. Because false positives are more expensive when you
are using more costly punishments.

2. In fact, in an efficient system,

3. The cost of punishing an innocent defendant is
punishment cost.

4. The cost of acquitting a guilty is
apprehension+litigation cost.

5. So the number of one error that trade off against
another is the ratio of the two numbers.

K. Why does civil law normally not have
probability multipliers?

1. Reducing the negative incentive to be a victim vs
increasing the positive incentive.

2. Faking an injury can pay even without multipliers,
but ...

3. Making an accident happen cannot.

4. With probability multipliers, there is an incentive
to "arrange" an accident, with friendly witnesses to make
sure that the probability of conviction for this accident is
near one.

5. Think of the distinction between multipliers less
than one and multipliers greater than one as analogous to
the difference between insuring a building for 90% of its
value and for 110% of its value--something special happens
when you pass 100%.

6. This suggests that another reason for criminal law is
to permit probability multipliers, given the fake offense
problem.

7. But criminal law is only a partial solution. Police
can frame you, get paid off in money or information or
assistance for not hanging you.

8. But it does imply that a pure civil system would have
to either do without probability multipliers or have
institutions designed to deal with false
offenses--presumably liability for faking an offense.

L. Why does civil law assign the claim to
the victim?

1. The right rule for transfers to give appropriate
incentive.

2. Reduces transaction costs since he has the evidence.

3. And the deterrence incentive.

M. Why does the same person control
prosecution and collect the fine in both systems?

1. In 18th c. England, didn't.

2. Which leads to compounding, so

3. Why not eliminate the complication?

XIII. A real world
example of a pure civil system--more private than ours. For
details, see my article

A. The history of Iceland

1. In the ninth century, King Harald put together Norway
under his authority

2. The people who didn't like it left--many of them to
Iceland

3. Where they set up a legal system based on traditional
Norwegian law--minus the King.

B. The formal structure: .

1. Godar and Thingmen. Franchise feudalism.

2. Making laws.

3. Enforcing them--fines and outlawry.

C. Considered as a fully private system:
Why was it stable?

1. Because if you tried to defy the law, relying on the
power of yourself and your friends,

2. Every conflict would lead to law cases which your
side would lose,

3. Forcing you to either pay for the damage you had
done, or pull the relatives of the people on the other side
who you had hurt into the coalition against you.

D. Considered as a fully civil system--how
did it solve the problems?

1. Poor victim problem:

a. Claims were transferable.

b. A certain amount of "pro-bono" defense, possibly
to establish a reputation.

2. Judgement-proof defendant problem:

a. Debt thralldom

b. Informal credit arrangements

c. If you couldn't pay you got outlawed, so you had
an incentive not to be judgement-proof.

3. Probability multiplier problem.

a. No probability multipliers in the law.

b. Penalty and social pressure to prevent concealing
an offense.

4. Fake offense problem. Abusing the legal system seems
to have been tortious.

4. Compare to 1066; in three weeks there were three big
battles (Fulford, Stamford Bridge, Hastings) that may well
have killed a larger fraction of the population of England,
Norway and Normandy than fifty years of Icelandic feuding
killed of the population of Iceland.

4. It changed de jure c. 1880, when they finally started
having public prosecutors.

5. Private prosecution of crimes is still possible in
the UK, and occasionally occurs.

C. Punishment puzzle, explanation.

1. Why there was no imprisonment--too expensive for
dangerous criminals whom you have to guard

a. Why not penal slavery? Hard to run it at a profit.

b. Galley slavery the exception, and ..

c. transportation--penal slavery far away, hard to
get back.

d. Someone who was convicted of a capital offense and
transported was taken (usually) to the New World, sold
into 14 years of indentured servitude.

2. Some numbers from France suggest that the one time
cost of transportation to the British government was
comparable to the annual cost of imprisonment for
non-violent prisoners in France.

3. Why the switch to imprisonment at the end of the
century?

a. England got richer, or ...

b. Developed more scruples about hanging people, or
...

c. There was an ideological shift from belief in
deterrence to belief in rehabilitation.

D. Prosecution puzzle: Explanation

1. Why did anybody prosecute? It cost money and, unlike
a civil system, they didn't get a damage payment. If the
prosecution succeeded, the defendant was hanged, or
transported, or pardoned.

2. Private deterrence via reputation, or ...

3. Via associations for the prosecution of felons.

4. In order to have a threat to compel a covert out of
court settlement--a transaction called "compounding a
felony."

5. Which was legal and proper for a misdemeanors; there
is some evidence that it happened for felonies, although
illegal.

E. Pardoning puzzle: Why pardon
people?

1. How it happened:

a. A petition was sent to the crown asking for a
pardon.

b. It might be at the instigation of the judge, or
...

c. The convicted felon's friends and anyone they
could get to support them.

2. Price discrimination according to how much punishment
is needed to deter.

a. If the defendant was a "good boy gone bad,"
holding him in an unpleasant prison for a couple of
months awaiting trial, then scaring him half to death by
sentencing him to hang, might be enough punishment to
deter the next "good boy" from going bad.

b. We do that sort of price discrimination too--via
judicial discretion in sentencing (less since the Federal
guidelines went into effect).

3. Price discrimination according to how much punishment
costs.

a. Does he have a family that will "go on the parish"
(i.e. on welfare)

b. Is he a valuable citizen, as shown by petitions
etc.,

c. On the other side, is he a habitual offender, so
that hanging him will save us the cost of his future
crimes?

d. So different punishments for different people, by
judicial discretion in our system, by royal pardon in
theirs.

3. Selling pardons?

a. Done quite explicitly by the crown in the Middle
Ages, for cash.

b. Might be done implicitly here--your friends get
you off by offering informal services, such as political
support, to local powerful people, who can help persuade
the judge to pardon you.

c. In a modern society, having an in with a judge can
also be valuable--to fix traffic tickets, for example.

1. Large rewards for convicting offenders of particular
crimes was seen as a possible solution to the problem of
incentive to prosecute, especially for victim anonymous
crimes such as highway robbery, but ...

2. It created a problem of entrapment, perjury, framing
innocent defendants, etc.

1. Rancher/farmer prediction: They will behave in the
same way whether the law provides for open or closed range.

2. Correct prediction.

3. Wrong reason.

a. Coase's reason was because of side payments.

b. Ellickson's explanation was that such issues were
determined by local norms, not by the official legal
rules--and the norms in open and closed range areas were
the same.

B. How the system of norms works:

1. Self enforced

2. With a range of sanctions

a. The first time his cattle stray into your wheat
field you call up to complain; if he is a responsible
neighbor he comes over promptly to get the cattle,
apologizes, if the damage was serious helps undo it, and
is more careful next time.

b. If he doesn't act that way, you start spreading
true negaltive gossip about him.

c. If that doesn't work, you drive his cattle a long
distance in the opposite direction from his property, and
leave them there for him to find--eventually.

3. No arbitrator beyond public opinion. Depends on a
society of neighbors who know who to believe.

4. Suing is ruled out by the norms, so the "official"
legal rules become irrelevant.

C. The efficiency of inefficient
punishment.

1. The reason you don't punish your neighbor by
slaughtering one of his straying cows is

2. That you would have too much incentive to do so even
if he didn't deserve it

3. As per our discussion of the disadvantages of
efficient punishments.

D. Fence building--the same story.

E. But not accidents with motorists who run
into cattle. They are strangers, hence not a part of the system
of norms of neighborly behavior.

F. Other norms Ellickson discusses:
Whaling. Photocopying.

G. The economics of norms.

1. Locally efficient.

2. But not globally efficient.

a. Whalers efficiently hunted one species after
another into near extinction.

b. They would probably have been better off limiting
their catch so as to preserve their prey, but ...

c. Any whaler or group of whalers who did so would be
bearing the cost of catching fewer whales, while sharing
the benefit of more whales in the future with everyone,
including the whalers who did not restrict their catch.

H. Implications. Crime rates?

1. The facts about U.S. murder rates.

a. Most of the U.S. has murder rates comparable to
those in European countries.

b. The high national average reflects very high rates
in the inner cities.

2. Explanation? Perhaps ...

a. Crime control is mainly by norms and reputation.

b. And they break down in a society where many people
do without marriage or jobs.

XVI. Medieval
England:

A. The same offense could be prosecuted in
four ways.

1. Appeal of felony: A private criminal action.

2. Indictment of felony: Public criminal action.

3. Write of Trespass: Private civil

4. Indictment of Trespass: Public civil (plus some
criminal punishment as well)

B. Pre 1208 vs post 1208 Appeal vs
indictment.

1. Somewhere around 1208 A.D. the legal rules changed.

a. Before that date, if you were prosecuted
privately, as an appeal, and the prosecutor dropped
charges, it was over.

b. After that date, if the private prosecutor dropped
the case, the Grand Jury could pick it up again as an
indictment of felony.

c. Before the change, a sizable majority of the cases
were prosecuted as appeals, afterwards as indictments.

d. Presumably because the incentive to prosecute an
appeal was lower once the prosecutor could no longer
guarantee the defendant that, if he settled, the case was
over.

C. Puzzle: Why the long shift from
privately to publicly enforced law?

1. Anglo-Saxon England was rather like saga period
Iceland, although a less extreme version, since they had
kings. From there you go to the mixed public private system
of the 12th century, and by the 17th or 18th century
essentially all criminal cases are, at least nominally,
public--the King vs X.

2. Why did this long change happen?

a. People got smarter. This doesn't seem very
pluasible--surely the Anglo-Saxons knew more about the
factors determining how their legal system worked than we
do.

b. Circumstances changed and the legal institutions
changed accordingly. Private deterrence via reputation
works a lot better in a society with little mobility and
small populations.

c. A revenue grab by the crown. One consequence of
the change was that the revenue from punishing criminals
went to the crown, as fines, forfeits, or payment for
pardons, instead of to the victim.

D. Why was there a temporary reversal (if
it happened) to give the 18th c. system, in which prosecution
was nominally public but actually private.

1. Blackstone described the appeal of felony as an
action that was still on the books, but no longer actually
used, so it looks as though private criminal actions had
vanished, but ...

2. The indictiment of felony, although nominally a
public action, was in practice privately prosecuted.

3. Presumably, the profits from enforcing the criminal
law were getting divided--some to the victim via covert out
of court settlements, some to the crown via political
payments for pardons.

4. Which may explain why compounding was illegal--in an
attempt to cut down the victim's share.

5. One possibility is that the reversal was a result of
the English civil war and ensuing political turmoil.

6. Another is that the indictment of felony was always,
in practice, privately prosecuted--we just don't know as
much about law enforcement in the Middle Ages, so the fact
isn't as obvious as it is for the 18th century.

XVII. The
civil/Criminal puzzle: Again.

A. Is there a good reason to have the
system we have?

1. Do we need both civil and criminal law?

2. Does it make sense to allocate offenses the way we
do?

3. Does it make sense to bundle characteristics the way
we do?

a. Victim prosecutes/state prosecutes.

b. Victim owns claim/state owns claim.

c. Fine vs punishment

d. Moral sanction

e. Level of proof required for conviction

B. Historical light on these
questions:

1. Iceland had a pure civil system.

2. Medieval England mixed the bundling, had multiple
options for the same offense.

3. 18th century England used private prosecutions for
criminal offenses.

b. But not for offenses where the offender does not
know enough about the victim to know his reputation, or
whether he is a member of an association

3. Rewards were established to fill in this gap--but
led to problems with entrapment and framing.

XVIII. Summary of
last week:

A. We looked at three+ different systems
for doing what we do with tort and criminal law:

1. Iceland: Private enforcement, full civil

2. 18th c. England: Private prosecution, punishment at
the extremes

3. Shasta county: Norms as a substitute for law.

4. A little on medieval England.

B. Some of what we learned:

1. Different allocations to tort/crime are possible:
Iceland, (Shasta), Medieval

2. Different bundling of legal rules, not fitting our
tort/crime distinction, are possible. Some of the relevant
choices are:

a. Who controls prosecution

b. Who collects the punishment

c. Price or prohibit behavior

d. Moral stigma?

3. For example, we observed:

a. Privately prosecuted law with "criminal"
punishments and government collection of the punishment
(it was the crown, not the victim, that could pardon the
convicted offender, transport him, etc) in 18th c.
England.

b.Privately prosecuted law with criminal punishments
and private collection in the medieval appeal of felony.

c. Publicly prosecuted law with "civil" punishments
(plus criminal) in the medieval indictment of trespass.

c. Possibility of out of court settlement
(Medieval--there is evidence that the appeal of felony
declined in popularity after it became impossible for the
plaintiff to guarantee the defendant immunity in exchange
for a settlement. Probably 18th c. England)

5. Too much incentive can be a problem for private
prosecution:

a. 18th c. reward system

b. Why Shasta county uses inefficient punishments

c. 18th c. England, at both the public and private
level, may have converted inefficient punishments to
efficient punishments (compounding a felony, selling a
pardon)

6. Some of the ways of solving problems with private
enforcement that might not have occurred to us if we had not
observed them are:

a. Punishing the offense of concealing an offense,
thus raising the probability of convictions, which
reduces the efficient punishment and thus the risk that
defendants will be judgement proof. We punish hit and run
accidents more seriously than ordinary accidents.

c. Or giving them an incentive to raise the fine from
their friends and relations.

d. Marketable torts as a way of making it possible
for poor people to get their rights enforced.

7. Distinction between locally efficient and globally
efficient.

a. Why norms give only local efficiency.

b. This is related to the issue of efficiency of
common law. The law may embody pre-existing norms--and
their efficiency characteristics. Also, getting
individual judges to take account of the influence of
their precedents on people not before them is a problem
analogous to getting groups of individuals to take
account of the influence of their norms on people not in
the group.

c. So is the problem of getting governments to take
account of the influence of what they do on people other
than those controlling the government.